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THURSDAY, NOVEMBER 3, 1988
"WITH THAT VOLATILITY, WE ARE LIKELY TO SEE CONSIDERABLE FLUCTUATIONS IN GOVERNMENT REVENUE. BUT ONE THING THAT DOES NOT FLUCTUATE IS PUBLIC EXPENDITURE ON A RECURRENT BASIS," HE SAID.
MR JACOBS SAID THAT IF THERE WERE TO
BE A DOWN-TURN, PUBLIC EXPENDITURE WOULD STILL HAVE TO BE FINANCED SOMEHOW AND THE GOVERNMENT WOULD THEN HAVE A CHOICE OF INCREASING DIRECT TAXES, BORROWING, OR DRAWING DOWN ITS FISCAL RESERVES.
IN
"ALL THESE OPTIONS CARRY WITH THEM CERTAIN RISKS. PARTICULAR, IF WE WERE FORCED TO INCREASE DIRECT TAXES SIGNIFICANTLY, OUR TRADITIONAL ATTRACTIVENESS AS A LOW TAX TERRITORY COULD BE ERODED.
"THIS COULD HAVE AN ADVERSE EFFECT ON INVESTMENT, PARTICULARY OVERSEAS INVESTMENT, AND IN THESE CIRCUMSTANCES, THE YIELD FROM DIRECT TAXES COULD CORRESPONDINGLY SHRINK IN REAL TERMS, THEREBY EXACERBATING THE PAIN, HE SAID.
"
MR JACOBS SAID ONGOING RESEARCHES WITHIN THE ADMINISTRATION TENDED TO CONFIRM HIS BELIEF THAT A MEASURE OF TAX DIVERSIFICATION COULD WELL LEAD TO A MORE STABLE TAX REGIME WHICH WOULD BE BETTER ABLE TO WITHSTAND DIFFICULT TIMES WITHOUT MAJOR ADJUSTMENTS, EITHER IN RATES OF TAX OR SOURCES OF REVENUE.
AN
"FURTHERMORE, A WIDER TAX BASE MIGHT ALSO PROVIDE OPPORTUNITY FOR RATIONALISING SOME EXISTING INDIRECT TAXES, HE SAID.
"PROVIDED WE KEEP THE RATE OF TAX MODEST, THE INFLATION WOULD BE NEGLIGIBLE, HE ADDED.
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IMPACT
HE NOTED THAT IN MANY TAX ADMINISTRATIONS THROUGHOUT THE WORLD, THE GOVERNMENTS HAD CHOSEN TO INTRODUCE SOME FORM OF SALES TAX.
"SOME OF THESE TAXES ARE VERY COMPLICATED AND ADMINISTER AND OTHERS TRY TO ACHIEVE GREAT EQUITY BUT AT COST.
DIFFICULT
CONSIDERABLE
ΤΟ
FOLLOW WHAT
"I DO NOT BELIEVE THAT HONG KONG SHOULD BLINDLY HAS BEEN INTRODUCED ELSEWHERE, ALTHOUGH WE ARE CERTAINLY LOOKING AT OTHERS' EXPERIENCE IN ORDER TO HELP TO FIND SOMETHING ΤΟ SUIT OUR CIRCUMSTANCES, HE SAID.
W
MR JACOBS SAID THERE WERE THREE CRITERIA WHICH WERE OF PARAMOUNT IMPORTANCE IF HONG KONG WERE TO INTRODUCE A SALES TAX.
FIRST, IT HAD TO BE DEMONSTRATED THAT A SALES TAX COULD PRODUCE A STABLE AND WORTHWHILE REVENUE YIELD AT A LOW TAX RATE, HE SAID.
"SECONDLY, THE TAX SHOULD CAUSE MINIMAL
ECONOMY.
DISTORTION TO THE
"AND THIRDLY,